Development Sites

from Oliver Hume Quarterly Market Insights - March 2021

How Long Will Regional Property Surge Last as Recovery Continues?

2.4 DEVELOPMENT SITES

The pandemic has ushered in a range of changes to property markets around Australia.

One of these changes has been an increase in buyer demand for regional locations, especially those areas within close proximity (or with easy access) to major capital cities.

While regional markets had enjoyed increasing demand, driven by a range of factors such as affordability and consumer preference shifts favouring lifestyle locations (for example, coastal and tree-change locations), COVID-19 has been a game changer.

There is considerable uncertainty around to what extent these changes will be permanent and how they will impact different parts of regional Victoria in the long-run.

One possibility is that larger regional cities closer to Melbourne will continue to see higher levels of demand while smaller townships, especially those in more distant locations, will not.

However, the increasing prevalence of working from home might change dynamics in even more distant locations.

Currently, developers are actively considering and acquiring sites in several regional markets including both larger regional cities and towns which are relatively well-connected to Melbourne (for example, Geelong, Warragul, Kyneton and Ballarat) and more distant markets (such as Bendigo and Shepparton).

Across the broader residential development market an increasing number of players are investigating regional opportunities. This includes those that have not specialised in residential land development previously.

A range of factors are driving this increased interest including lower yields across asset classes and the impact of the pandemic on various (mostly nonresidential) property classes, such as commercial office and retail.

Lending rates remain low although non-banks are increasingly competitive vis-à-vis banks in terms of not only lending rates but also flexibility of loans.

Given the rising level of interest in the sector, we expect to see the price of regional residential englobo land to continue increasing.

Managing Director | Development Sites p.vassallo@oliverhume.com.au

REGIONS DEVELOPMENT SITE INDICATIVE VALUE (PER HA) 1 Ballarat - Winter Valley, Lucas, Bonshaw $500,000-$550,000 2 Geelong West, Batesford $600,000-$700,000 3 Shepparton $300,000 - $350,000 4 Broadford $600,000 - $750,000 5 Torquay $1,500,000-$1,750,000 6 Geelong, Charlemont, Armstrong Creek $900,000 - $1,200,000 7 Warragul, Drouin $450,000-$550,000 8 Bacchus Marsh $550,000-$750,000

9 Kilmore $400,000-$450,000

10 Kyneton 11 Bendigo 12 Lara, Lovely Banks $300,000 - $400,000 $400,000-$600,000 $1,000,000 - $1,200,000

*Based on 12 months to 7 year terms. These are indicative only as values can vary widely depending on factors such as planning status, development sequencing and servicing etc.